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Croce prepares to revive Statler by offering lease agreements

On the third floor of Statler City, two levels above the wedding celebrations and glamorous receptions, lies a quiet, lonely world straight from the past, devoid of activity since it was abandoned several years ago.

A series of bare offices jut out along the darkened hallways, with white walls, wood-paneled doors and drop ceilings still mostly intact. Save for a random couch, there’s no furniture, and the drab carpeting is dirty and dusty from lack of care. The seal of the state Workers Compensation Board still hangs, forgotten, on an empty white wall, above the raised platform where the judge or hearing officer sat.

Now that emptiness may soon be filled. Developer and Statler owner Mark Croce wants to begin leasing space again in the once grand hotel. “It’s really time to bring that building and property back on line in a big way,” he said.

Croce is putting the bulk of the vast building on the market for lease for the first time since he acquired it out of bankruptcy for $700,000 three years ago.

The lower levels of the hotel are now used for weddings and banquets, but Croce wants to capitalize on what he sees as new energy in downtown Buffalo. He’s seeking retail or commercial tenants for the 16 open floors of the prominent edifice located on the edge of Niagara Square, starting with a retailer for the ground floor and offices for the third and fourth floors – which could be quickly prepared for new tenants with only cosmetic changes.

He also is offering space through brokers in five other downtown Buffalo buildings for restaurants, retailers or offices. And he’s offering an acre of brownfield land on Pearl and Franklin streets, with refundable state tax credits of up to 20 percent of redevelopment costs.

“It’s an exciting time in Buffalo so I decided it’s a good time to market these prime properties,” he said. “While I’m busy with other projects, there’s no reason not to let someone else do the work to backfill some of these spaces in great locations.”

However, it’s also very risky, not only for him but also for the broader market. Putting all that mothballed space back on the market could increase the amount of vacant commercial office space in downtown Buffalo by one third.

Nearly 17 percent of downtown office space is now empty, and some brokers and developers have warned for the past two years that a significant increase in vacancy – such as from leasing space in the Statler or One Seneca Tower, the city’s tallest building – could flood the market, drive down rents and devastate property values.

“This substantial chunk of new commercial inventory will not be helpful to the central business district’s high office vacancy rates,” said broker Paula Blanchard of RealtyUSA.

But others like Jim Militello, owner of J.R. Militello Realty, were not concerned. “In one form or another, this space has been on the market for 20-plus years,” he said.

Croce said he’s not expecting to lease out the entire Statler at once, and still anticipates as much as 70 percent of the building to eventually be residential, given the renewed interest in urban living.

Each floor of the Statler has 32,000 square feet, divided among three wings of about 7,000 square feet each. That’s up to 496,000 square feet in all, out of the building’s total of 676,342 square feet on 18 floors.

Croce is seeking $18 per square foot, all inclusive, which classifies the space as lower Class A or upper Class B, based on data from brokerage CBRE.

“You don’t get many other buildings in the central business district with 32,000-square-foot floorplates,” said Richard Schechter, senior executive advisor and associate broker at Pyramid Brokerage Co. of Buffalo, who is handling the listing with colleague Tyler Balentine.

The move by Croce marks a change in strategy. Until now, he has focused mostly on the towering building’s first two floors and mezzanine level, where he has established a profitable catering, bar and banquet operation since reopening them for business in January 2012. He has sought to stabilize the rest of the 94-year-old building, especially its facade, leveraging a $5 million city investment, but put off reuse of the rest until now.

“There’s so much activity and so much interest in being located in the city center again,” he said. “There’s no reason I shouldn’t be marketing to prime tenants now.”